Virtual Rewards Trump The Physical 85% Of The Time With SmartyCard

Earlier this month saw the debut of SmartyCard, a new service tying educational games to physical and virtual rewards. Parents purchase a set amount of virtual currency, which is then doled out to kids after taking quizzes or following other lessons. Today SmartyCard announced that almost 85% of its virtual points had been spent on virtual world prizes from partners Bella Sara, Cartoon Doll Emporium, ClubPenguin, Digital Doll House, Elf Island, Planet Cazmo, Stardoll, Webkinz, and ZooKazoo.

"Our rewards have been extremely strong around virtual worlds. We have a backend around Amazon that delivers physical goods, but the virtual rewards have made up 85% of our redemptions," continued Chris Carvalho, General Manager at SmartyCard. "They've been extremely popular, and the whole genesis of the idea was around virtual worlds because they're exploding and tween usage on the Internet was exploding compared to TV. You add all that up and look at the fact that a tween doesn't have means to pay for anything, and parents want some way to reward them."

Part of the explanation may be that the virtual worlds rewards are the first available to users, theorizes Carvalho. Because there's a low overhead, they can be offered for the lowest number of points. Still it's hard to ignore the trend of kids shifting traditional play habits to online interaction, from Barbies to BarbieGirls.com or stuffed animals to virtual penguins and Webkinz. And with the crowd of virtual worlds in the space, parents are looking for educational content as a way of choosing between them.

Carvalho says that its already working with a number of other virtual worlds and plans to add one or two every few weeks, ranging from high-profile worlds to newer entrants to the field.

"We feel we're part of the ecosystem and offer something of great value to them while they bring great value to us," he explained. "As soon as someone gets the concept of SmartyCardss, they immediately grok that this is an extreme value for us and they're always looking for an edge of how to develop new users and have them experience their sites. It's just another way for them to acquire new users."

Money VS. Users

While some virtual worlds are using SmartyCard as another monetization method, some are finding benefits of being part of SmartyCards network, which is then presented to its users, and gaining a boost of educational content. That's why soem worlds, Planet Cazmo, for example, offer their currency and rewards more cheaply through SmartyCard than through their direct site.

"So SmartyCard is really both a customer acquisition tool and a revenue source – as we expect a certain percentage of any new user to convert to a paying user of Planet Cazmo – either through microtransactions, or becoming a member," explained Michael Levine, CEO of Cazmo's developer Pileated Pictures. "SmartyCard's 'learn2earn' approach is perfect for Cazmo's tween audience that is looking for new ways earn virtual cash, and educates them as they do it."

Neither SmartyCard nor its partners that I spoke to were willing to disclose the financial side of their arrangements, though Carvalho says it's unique with every partner. But because there's a fixed cost to set it up and virtual goods and services have a flexible value, he says, it's easy to adjust costs or switch back and forth from focusing on customer acquisition to monetization.

Stardoll, which both has other prepaid cards and doesn't seem to be hurting for users, couldn't dicuss how SmartyCard is affecting its revenue, but is getting benefits on both sides.

"As an acquisition tool that's a definite benefit of the program," said Matt Palmer, Executive Vice President & General Manager, Stardoll Entertainment. "It wasn't however our driving reason for participating. We saw a great program that made sense for us to be part of and went from there."

Palmer says the comapny is pleased with the successful launch of the program and that the educational environment is a great fit with Stardoll. The differences between SmartyCard and other monetization methods, though, make them incomparable.

"These are our prepaid cards, they are simply being offered as a gift to kids if they choose it," he said. "Comparing this gift/reward program with a retail business wouldn't really be a fair comparison."

Upcoming

While SmartyCard will be adding many more virtual worlds to its reward portfolio (as many as 10 in the next six months), Carvalho doesn't expect to see oversaturation. Over the next year, he expects to roll out new ways of supporting worlds, letting users check them out, adding in worlds for different audiences, and letting users establish wishlists to get straight to the worlds they want.

And while there are what Carvalho calls "no-brainers" for partners, like Club Penguin, which establishes SmartyCard as a legitimate operation for parents, the service doesn't want to limit itself to the majors. There are some, like those, that are great business decisions, and, of course, the long term will almost certainly see inclusion with parent company Gazillion's upcoming Marvel casual MMO and Lego Universe. But the company also relies on a kids council to review newer sites and identify them for inclusion, like Planet Cazmo or ZooKazoo, based on their excitement.

We'll also likely see SmartyCard start to appear in other new places. Right now users go to the SmartyCard site to take quizzes, which will soon be joined by Flash games and richer lessons, but they may eventually be able to find that content in their favorite virtual worlds and elsewhere on the Web.

"We've had a lot of requests from our rewards partners to do something like that," said Carvalho. "They immediately recognize the value of having an educational component and making sure their virtual world is not only fun but educational. I think you'll see something by the end of the year where we take things to a virtual world or other major distribution points that would like to have a mini-SmartyCard. Take the Hulu model, where they have their own sites but also partnerships. That's something we'll be focusing on."